Tech Reports

ULCS-09-017

Centralized vs. Market-based and Decentralized Decision-Making: A Review of the Evidence in Computer Science and Economics

Thierry Moyaux and Peter McBurney

Abstract

Within both economics and computer science, many authors have claimed that
decentralized or market-based approaches to decision-making are superior in general
to centralized approaches. The contrary claim has also been made. Unfortunately,
these claims are often supported only by informal or anecdotal evidence.
In order to assess these competing claims, we present a review of the literatures
in economics and in computer science bearing on these issues. Specifically, we
report research findings based on empirical evidence and on simulation studies,
and we outline the evidence based on formal deductive proofs or on informal and
anecdotal evidence. Our main findings from this literature survey are: (i) for efficiency
assessments, that there is wider variance in performance of organizations
using Market-Based Control (MBC) than in organizations using Centralized Control
(CC); (ii) that MBC and CC have the same efficiency on average; which may
explain the observation (iii) that human and computer organizations tend to cycle
between CC and Decentralized Control (DC) structures.

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